March 31, 2010

March 31, 2010: Three Very Nice Inflation-Adjusted Securities

Within my own blog and outside for other publications such as Seeking Alpha, I have been recommending that investors unhappy with miserly dividends from short and intermediate term government securities and worried about stretching out too far on the maturity curve because of the distinct possibility of inflation should investigate trust preferred securities and inflation-adjusted preferred securities.

Three out of the larger number I have written about may be appropriate for you at this time.

Cusip 59156R504MetLife Floating Rate Preferred Series A (METpA)This security trades at $23.82 and currently yields 4.18%.The floating rate is based upon the 3-month LIBOR rate plus 1% with a floor of 4%.The call is at $25.00. Dividends are paid quarterly, with the next payout being June 15th.

Cusip 902973155 U.S. Bancorp Floating Rate Perpetual Preferred Series B (USBpH)This security trades at $22.67 and currently yields 3.87%. The floating rate is based upon the 3-month LIBOR rate plus .60% with a floor of 3.5%. The call is at $25.00 Dividends are paid quarterly with the next payout being April 15th.

Cusip 744320409Prudential Financial Inflation-Linked Notes due 4/10/2018 (PFK)This is my personal favorite. The security trades at $24.44 and currently yields 5.22%.The floating rate is based upon the CPI plus 2.40% with. The call is at $25.00.Dividends are paid monthly.

Preferred securities that are investment grade, liquid, priced below the call and offering a generous fixed rate or, as the above, a rate that will drift higher as our inflationary cycle begins, are a stable, easy and low-priced way to keep income-oriented portfolios diversified, viable and current with prevailing economic conditions.